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PosOnderwerp: We cannot fund forever’   We cannot fund forever’ EmptyThu Apr 15, 2010 7:59 pm

‘15 April 2010
Brendan Boyle


TOUGH STAND: Finance Minister Pravin Gordhan

Gordhan says parastatals must work for everybody
PUTTING state-owned enterprises like Eskom to work for all South Africans will require a review of their culture and their viability, Finance Minister Pravin Gordhan said yesterday.

Briefing MPs on the plans of his treasury and of the South African Revenue Service, Gordhan reiterated the position he took in his budget against bailouts for poorly run state corporations.

“We cannot go on funding these institutions if there is mismanagement or poor financial management and you have heard that in respect of SAA, Denel and other entities as well,” he said.

Gordhan reminded MPs that two reviews were under way to test the viability of corporations like Eskom and Transnet as well as scores of smaller state-owned entities.

One review is being driven by the cabinet and the other by President Jacob Zuma, who has said the two would be merged to come up with recommendations for the future of the concerns.

“What the government wants to do is to ensure that these are well managed entities, that the moral hazard that accompanies SOEs – which is that you can always rely on your parent to sort out your financial problems if you engage in all sorts of incorrect activity – is something that we need to mitigate,” he said.

But Gordhan added that none of these initiatives would work without a conversation, which has yet to begin, about the mandate of the corporations.

“We keep using this phrase: “You’ve got to run it like a business. But then running it like a business means that you also get the wrong culture and you forget that these are publicly owned institutions that are there to serve the public, to implement government programmes and to reinforce government objectives and not just run as entities that makes profit for its own sake,” Gordhan said.

Gordhan also warned that the government had some way to go to clean up the abuse of state procurement to enrich individuals rather than to serve the public.

The procurement of supplies and services by state corporations is a central plank of Zuma’s growth strategy, but he has said repeatedly that profiteering must be stripped from the system.

“We haven’t quite cracked this cancer,” Gordhan said.

Gordhan also said the government might consider raising taxes if the economy does not recover enough to boost tax revenue.

“At that stage (February’s budget) we didn’t see any need to increase taxes, but if the economic and revenue position does not improve we will have to look at that question again.” – Additional reporting by Reuters
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